Recently, I was asked to contribute to a blog post by Chargify. Due to space limitations, it was abridged ... so I wanted to provide my full response below.

QUESTIONWhat is the #1 piece of advice you’d share for how SaaS businesses should think about pricing in 2018?

ANSWERSetup Your Pricing (aka: give your pricing a chance)

Continuously test and fine-tune new ways to better setup your pricing, with improved value messaging at every touchpoint.

It is common for leaders to conclude or suspect that pricing is the cause for low (or decreasing) conversions, wins or renewals. They may even reference verbatims from prospects, customers or sales staff as proof that pricing is too high or that a discount is necessary.

Reminder: It's not the price they don't like, but what they understand they are (or are not) getting for that price.

Q1: How well are you setting up your pricing?

Q2: If someone asked, how would you explain your pricing?

Q3: Are you making a compelling and credible value case for why your pricing makes sense?

Q4: Are you giving your value advantages the best chance to differentiate you from alternatives?

Q5: If you and your team do not believe in your pricing, why would your prospects and customers?

As you increase value clarity, you simultaneously increase pricing confidence in the minds of ….

yourself

your sales team

your entire organization

your prospects

your customers

The better you MAKE A CASE FOR YOUR VALUE, the better you make a case for your pricing.

The most common reason … prospects do not choose you -or- customers leave you … is they do not believe you are worth it.

Recommendation: One of the best (most effective) ways to understand, demonstrate and communicate value … is to contrast life WITH -vs- WITHOUT your solution.

The single most important and productive investment of your time is to get the right people in the same room and on the same page regarding how you make a meaningful and measurable difference in the lives of your customers. Simply start with two columns on a whiteboard; (a) Life Without - Status Quo and (b) Life With - Your Solution.

Be honest and realistic with how you actually help them save money, make money, save time, increase quality, avoid risk, achieve compliance, etc.

Below are nine (9) quick reminders to encourage you to refresh your curiosity, interest and intent to the topics of "profit" and "pricing". ​What if, during your next leadership or board meeting, you flipped your P&L and started with the following to better validate your "business model" and "business strategy".

Your Pricing Determines Your Profits

1. Return on Market Share​Careful how you approach gaining market share. You can drastically dilute the profit potential of your market.

2. Return on IdeasIdeas that are not monetized (profitably) are called hobbies or charity. Some invest a lot of time and money into finding this out.

3. Evasive and EarnedProfit is both fragile and slippery. Profit is not loyal and will not be taken for granted.

4. Profit Requirements You cannot calculate PROFIT without a PRICE.

5. The Metric of MetricsPROFITABILITY measures every business decision you make.

6. Source of Sustainable SuccessPROFITABLE companies (or profitable investors) are the only means for UNPROFITABLE companies to have a chance to be considered successful.

8. Exit LeversUnprofitable businesses, subsidized by investors, do not last unless they become profitable or acquirers believe you can contribute to their profitability. ** With many large corps not being able to generate profits on acquisitions that looked so promising, be careful if that is your exit strategy.

9. Source of All ProfitsALL the revenue and profits created ... past, present or future ... by every business or person ... is the result of pricing decisions.

Do not be merely curious or interested in profits ... achieving, growing and sustaining profits requires you be intentional.

In the image above, we clearly see the significant difference between the volume of Google searches for "business model" ... compared to other likely and related terms.[ United States -- Past 12 mos. -- "model" ]

When one thinks about it, such is reflective of how infrequent we hear conversations on the specific topic of profit or profitability (bottom-line). If the topic of profit does comes up, it is often short-lived as such conversations shift to related topics ... but rarely do they loop-back and sync all participants on how what was discussed impacts profits.

When someone performs a search due to curiosity, interest or intent related to "business model", should we imply they, by default, are equally curious, interested or intend to better understand "business models" within the context of profit as well?

But most are likely aware that such is more often not the case.

If one's curiosity, interest or intent in "business" is of such proportionately more importance, you would think the topic of "profit" would be closer to the same.

Even though the term "business" is more broad and could be assumed to include curiosity, interest or intent regarding pricing, revenue and sales ... and further, "of course we mean profitable pricing, profitable revenue and profitable sales" ... we all know based on experience that profit is rarely part of the conversation.

Maybe, the search trends are more reflective of the number of people who are merely curious about "business models" than those interested in understanding that a successful and sustainable business is only possible through profits ... and perhaps even fewer search with intent to grow or sustain profits.

What if we used "strategy" in our search terms instead of "model" ... let's see.

In this next image above, I was pleased to see "pricing strategy" gain relative to "business strategy" ... but we also know that more time and attention is invested in "sales strategy" and "marketing strategy" than is invested in "pricing strategy" or "profit strategy" (more on why that is can be found here). [ United States -- Past 12 mos. -- "strategyl" ]

Let's take a look at some more broad, but common, terms used in searches and everyday business conversations ...

Overall, whether looking at the United States or Worldwide above .... there is a gradual downward-trend since 2004.

Again, to be sure, these are very broad terms that are used in many different contexts. But also note that "profit" and "pricing" trail far behind.

Below is a simple attempt to encourage you to shift your curiosity, interest and intent to the topics of "profit" and "pricing".

What if, during your next leadership or board meeting, you flipped your P&L and started with the following to better validate your "business model" and "business strategy".​1. Return on Market Share​Careful how you approach gaining market share. You can drastically dilute the profit potential of your market.

2. Return on IdeasIdeas that are not monetized (profitably) are called hobbies or charity. Some invest a lot of time and money into finding this out.

3. Evasive and EarnedProfit is both fragile and slippery. Profit is not loyal and will not be taken for granted.

4. Profit Requirements You cannot calculate PROFIT without a PRICE.

5. The Metric of MetricsPROFITABILITY measures every business decision you make.

6. Source of Sustainable SuccessPROFITABLE companies (or profitable investors) are the only means for UNPROFITABLE companies to have a chance to be considered successful.

8. Exit LeversUnprofitable businesses, subsidized by investors, do not last unless they become profitable or acquirers believe you can contribute to their profitability. ** With many large corps not being able to generate profits on acquisitions that looked so promising, be careful if that is your exit strategy.

9. Source of All ProfitsALL the revenue and profits created ... past, present or future ... by every business or person ... is the result of pricing decisions.

Do not be merely curious or interested in profits ... growing and sustaining profits requires you be intentional.

As appropriate, adjust the range of ... # of Transactions -and/or- $ per Transaction

Observe the simple realities of how many transactions at what price will achieve your goal.​

BonusWe have also made it easy to think through Acquisition Scenarios (revenue production) on the Quick Funnel Projections tab.

ExampleA smart founding team developed a break-through in applying Artificial Intelligence to help auto dealers generate more revenue from first-time car buyers, post the initial sale.

After a limited private beta, their first year (12 mos. following public launch) revenue goal is $5,000,000.

Through a series of strategy sessions with a trusted pricing and monetization consultant, they initially hypothesized that they could effectively frame a compelling value case for a $25k annual subscription.

The simple reality of the above is they would need to close 200 opportunities, at $25k each, to achieve their 12 month revenue goal.

Why Stop There ... With the above in mind, they next want to get a sense of the realities around their customer acquisition efforts ... so they used the Quick Funnel Projections tab.

They carefully noted that achieving 10% Prospect-to-Lead conversion rate, compared to a 20% conversion rate (a 50% reduction) ... would require they increase their Opportunity-Win-Rate by 100% (from 25% to 50%) in order to still hit their revenue production goal.

This highlighted the critical-importance of truly understanding their target customers and effectively communicating their (real) value advantages.

In either scenario, successfully increasing performance at each stage of the funnel ... contributes significant improvements to top-line revenue production.

How Does the (your) Story End ? Well the story isn't over. In part, because of the clarity that resulted from using this simple tool, they exceeded their 12-month revenue goal.

The added clarity increased their confidence and as a result ... they were intentional with their priorities and consistently fine-tuned their approach along the way.

Prospect to Lead Rate

Hypothesis = 20%

Actual = 25%

Lead to Opportunity Rate

Hypothesis = 20%

Actual = 30%

Opportunity to Win Rate

Hypothesis = 25%

Actual = 40%

How will your story end?

Perhaps better and more optimistically stated ...

How will you write the next Chapter in your story? Using this simple tool will help you ... or perhaps someone you know.